For consumers who find themselves in Summers's position, and for those considering whether to purchase a similar credit card debt protection plan, here are some tips:
Don't Do It. Most debt protection plans are expensive and confusing. They cost money in direct upfront payments, and even when they do pay out, they cost extra money in deferred interest payments. Besides, each plan has its own loopholes and exclusions that the issuer can sometimes use to avoid paying any benefit at all. "This is not the first time that I've heard this complaint," Detweiler says. "It's poor coverage for the most part, and most people would be better off saving that money."
The solution: Don't sign up in the first place.
If You Do It, Be Careful. If you have high credit card debt, or you worry you may soon experience a big drop in income, you may decide that a debt protection plan is right for you. If so, don't believe the promotional brochure or the words of a phone salesman. Get the terms of the insurance yourself, and read them. Make sure that it covers a job loss or medical problem you might actually experience.
And if you do it, you'd better be expecting calamity sometime soon. Paying $3,000 for a paltry $10,000 in maximum benefits shows just how quickly the expense of these products can stack up. The sooner the disaster, the bigger the financial payoff for the consumer.
Research Your Legal Options. Suing Sears is an expensive proposition. Joining a class-action lawsuit with other consumers hurt by debt protection products may be a better option. Many of these suits have already succeeded, with Bank of America agreeing to pay $20 millionto victims, Chase settling for another $20 million, Discover for $10.5 million, and Capital One for $210 million. Most of these products are regulated by state laws, Detweiler says, so the easiest way to check for a potential lawsuit to join is to call your state's attorney general's office.
Protect What You Have Left. For a consumer like Summers, a monthly payment of $184 means she doesn't have enough money left over to afford groceries. If money is that tight, it may be time to consult experts, Detweiler says. Consider talking to a bankruptcy attorney. Also, make an appointment with a nonprofit debt consolidation group that may be able to help you lower your monthly payments. For a list of reputable organizations, consult the Federal Trade Commission's registry.
* Not her real name. Names have been changed in this article to protect the reader's privacy.
Christopher Maag, contributing writer for Credit.com, graduated with honors from the Columbia University Graduate School of Journalism, and has reported for a number of publications including The New York Times, TIME magazine and Popular Mechanics.